Coal India - A Formidable Play Yet To Get Its Due: ICICI Securities

ICICI Securities Report

We hosted Coal India Ltd.’s management for a roadshow in Mumbai. Key points:

1. volume growth is likely to be the key growth driver;

2. e-auction volumes are likely to surpass 100 million tonne in FY24 (FY23: 62 mnte) though realisation may come off;

3. the major provisions pertaining to staff cost have been taken in FY23 itself;

4. washed coal volumes are likely to increase by 25% YoY in FY24;

5. Coal India is targeting an overburden removal ratio of 2.5 m3 /tonne (FY23: 2.1 m3 /tonne);

6. capex intensity is expected to remain high at Rs 150 billion-170 billion per annum.

In our view, Coal India stands at a vantage point with higher volumes partially offsetting the decline in e-auction premium and higher wage costs.

Our FY24E earnings per share of 33.6 (down 21% YoY) is based on the assumptions of no fuel supply agreement price hike, fully blown wage cost at Rs 473 billion, sales volumes at 745 mnte and e-auction premium of 81% over FSA.

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